After a small slump last week, the Permian basin is back on top in U.S. rig count gains released March 24. The Baker Hughes U.S. rig count gained a total of 20 new rigs this week, with a total of 809 rigs exploring for oil and gas. Baker Hughes reported 21 new rigs exploring for oil and gas, totaling 652, and one addition labelled as miscellaneous. The gas rig count dropped by 2 to 155.
Rig count changes by Basin
By state, only Louisiana and Wyoming lost rigs. Texas gained 8, Oklahoma gained 7, and New Mexico gained 3. Alaska, the state that could see significant gains in upcoming months following a large discovery of oil reserves, gained 1 this week.
Rig count up, oil prices down
The price of West Texas Intermediate (WTI) crude oil opened Friday at $47.67. At 3:00 pm EST, oil was up slightly from Thursday at $48.01. However, this is still lower than just a few weeks ago, when WTI consistently hit between $52 and $54 per barrel.
The continuing increase in oil inventories is part of the reason for the market dip. According to CNBC, Abhishek Kumar, a senior energy analyst at Interfax Energy in London, said:
A persistent increase in U.S. oil production, together with a rise in imports from Canada, contributed towards a large build in crude oil inventories. The market remains nervous about rising U.S. production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries.
U.S. inventories increased by around 5 million barrels from the previous week. At 533.1 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year, according to the latest from the Energy Information Administration (EIA).
As forecasters attempt to analyze what’s in store, a meeting of five representatives from Kuwait, Algeria, Venzuela, and the non-OPEC nations of Russia and Oman on Sunday will likely drive oil prices next week. The agreement to cut production among these countries could be extended, helping to keep the price of oil higher and help prevent another deep slip.
However, the United States is not among the countries who have agreed to cut production. Naeem Aslam, chief market analyst at Think Markets said, “OPEC has done their part, but U.S. inventory data is still rising, keeping the lid on the oil price,” reported Sara Sjolin from Marketwatch.
Many analysts believe that if U.S. inventories continue to grow and production continues to rise, the results won’t be pretty. Then, OPEC’s cuts won’t make a difference.